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Will Rockwell Collins (COL) Miss Earnings? - Analyst Blog

Rockwell Collins Inc. ( COL ), the aviation and military electronics maker, is slated to report first-quarter fiscal 2014 results on Jan 21, 2014. Last quarter it posted a 2.29% negative surprise. Let's see how things are shaping up for this announcement.

Factors at Play

Rockwell Collins is the foremost global supplier of communications and avionics equipment for both commercial and military customers. The company is currently focusing more on expanding its international businesses, which will in turn help to secure a stable revenue stream going forward in spite of the ongoing defense budget sequestration. In addition, the company is upgrading its core competence and engaging in innovation.

Recently, the company has entered into an agreement to form a joint venture ("JV") with a Chinese company to manufacture commercial flight simulators and training solutions. The 50:50 JV - ACCEL (Tianjin) Flight Simulation Co. LTD. - with Beijing Bluesky Aviation Technology will design, manufacture and market commercial flight simulators primarily for the Chinese market and then spread out worldwide. This collaboration is a significant step in the development of commercial simulation and training in one of the fastest growing regions of the world.

Despite the aforesaid positives, we remain cautious about the company's short-cycle products, the U.S. government's delayed funding authorizations, program execution risk and high exposure to fixed price contracts. These negatives may to some extent challenge Rockwell Collins' future performance.

Earnings Whispers?

Our proven model does not conclusively show that Rockwell Collins is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: That is because the Most Accurate estimate stands at 93 cents while the Zacks Consensus Estimate is higher at 95 cents. That is a difference of -2.11%.

Zacks Rank #3 (Hold): Rockwell Collins' Zacks Rank #3 (Hold) complicates the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

TransDigm Group Incorporated ( TDG ), Earnings ESP of +6.25% and Zacks Rank #1 (Strong Buy).

Northrop Grumman Corp. ( NOC ), Earnings ESP of +5.16%and Zacks Rank #2 (Buy).

Huntington Ingalls Industries, Inc. ( HII ), Earnings ESP of +4.10% and Zacks Rank #2 (Buy).

ROCKWELL COLLIN (COL): Free Stock Analysis Report

HUNTINGTON INGL (HII): Free Stock Analysis Report

NORTHROP GRUMMN (NOC): Free Stock Analysis Report

TRANSDIGM GROUP (TDG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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